Private equity firm Veritas Capital is to acquire Emcore Corp’s satellite solar panel assets for US$150m in cash.
Under the asset purchase agreement, the sponsor’s investment vehicle Photon Acquisition Corporation will acquire all of the assets and…
Private equity firm Veritas Capital is to acquire Emcore Corp’s satellite solar panel assets for US$150m in cash.
Under the asset purchase agreement, the sponsor’s investment vehicle Photon Acquisition Corporation will acquire all of the assets and assume substantially all of the liabilities of Emcore’s photovoltaics business.
The transaction is subject to approval by Emcore’s shareholders and other customary closing conditions, and is currently expected to complete in December 2014 or January 2015.
Veritas has already entered into a voting agreement with certain shareholders of Emcore, including directors and officers of the company that together control 11% of the voting power, under which they have agreed to vote in favour of the transaction.
Founded in 1998, the photovoltaics business provides products for space power applications including high-efficiency multi-junction solar cells, coverglass interconnected cells and complete satellite solar panels, along with certain terrestrial applications.
The unit, which has 275 employees, reported fiscal 2013 revenues of US$70.5m.
Commenting on the transaction, Hong Hou, president and CEO of Emcore, said: “Veritas’ proven track record of fostering growth in high-technology and defence industry companies makes it an excellent fit for Emcore’s space photovoltaics business.
“Emcore’s board of directors and management team believe this transaction will benefit our satellite customers while providing considerable value to our shareholders. We are very excited to see our team in the space photovoltaics business partner with Veritas for the next stage of their growth.”
In connection with the sale of the photovoltaics business, Hou will step down from his position. He will continue to serve in his current role until a successor is appointed.
Veritas has been consistently active in the commercial space sector and has built up a sizeable satellite complements portfolio.
The sponsor acquired satcoms RF antenna developer CPI International for US$525m in late 2010, after that latter’s proposed merger with Comtech stalled. CPI has since made a series of bolt-on acquisitions including its Australian peer Codan Satcom, satcoms power amplifier products developer M C L and, more recently, Radant Technologies.
In November 2013, Veritas paid around US$381m for US satcoms components maker Anaren in a controversial deal that saw the parties agree to a settlement arrangement with certain Anaren shareholders, which had filed lawsuits over the nature of the transaction.
Veritas also owned a sizeable stake in US-based radio-frequency semiconductor specialist Aeroflex, which was sold to UK defence and space technology firm Cobham for US$1.46bn in May 2014.
Raymond James acted as exclusive financial adviser to Emcore with Skadden, Arps, Slate, Meagher & Flom providing legal advice. Schulte Roth & Zabel acted as legal adviser to Veritas, with Covington & Burling providing certain regulatory advice.
End in sight to Emcore’s restructuring?
The sale is part of Emcore’s long-running restructuring strategy that initially began back in 2011, after its revenues were significantly hit by major flooding to its manufacturing facilities in Thailand.
Since then, Emcore’s management team has focused on offloading non-core assets to reduce costs and stem the losses.
Having sold its enterprise product lines to Sumitomo Electric Device Innovations USA at the start of 2012, Emcore then sold its loss-making terrestrial concentrating photovoltaics (CPV) assets to Suncore Photovoltaic Technology, a Chinese company in which it owned a minority stake, in August. The company then sold its Emcore Solar New Mexico subsidiary to the same business for US$1.5m in March 2013.
Emcore finally sold its minority stake in Suncore to majority shareholder San’An Optoelectronics for US$4.8m in June 2013.
At the same time, it sought to improve its capital structure, completing a one-for-four reverse stock split in February 2012 and then carrying out two share placements in October 2012 and September 2013.
In December 2013, the board of directors hired Raymond James to look at strategic options for the company. The sale of the space photovoltaics business to Veritas is the first major action resulting from the strategic review.
Emcore’s remaining operations are predominantly its fibre optics business. The company stated that it will continue to review and implement various initiatives to further reduce its cost structure. But the board believes that the remaining business can achieve EBITDA break-even by September 2015.
